March 2008

Do Subsidies Work?

Frequently when prices get too high in some sector governments are called upon to provide subsidies to those who can't afford to pay.

In the US there are a large number of these. Heating fuel subsidies, food stamps, housing rental assistance and Medicaid (not Medicare) are aimed at necessities. There are also government subsidies such as Pell Grants to help pay college tuition. With the sudden downturn in the housing market there are proposals to subsidize existing mortgages. So these actions work?

I'm going to keep this brief and not overload the discussion with lots of statistics, so just take this as a working hypothesis. If you are especially interested in one program or another, or in experiences elsewhere, then please feel free to contribute data.

US Faces Severe Recession

Submitted by on

former National Bureau of Economic Research President Martin Feldstein:

I'm afraid, because of a lack of liquidity in the credit markets," he said.

The Fed's new credit facility, announced on Tuesday, "can help in a rather small way ... but the underlying risks will remain with the institutions that borrow from the Fed, and this does nothing to change their capital," Feldstein noted.

"Innovation Employment Act" - Giffords-D-AZ - would double H-1b

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From Kim Berry, President, Programmer's Guild:

(RO: please use this list to post this kind of action alerts!)

Thanks Ron Hira for spot-on rebuke of the "worker protections."

Note Giffords' sleight-of-hand in this paragraph - the bill does NOTHING to limit H-1b use by "outsourcing companies" TCS, Infosys.

"The bill would prohibit companies from hiring H-1B workers, then outsourcing them to other companies, he said. H-1B opponents have complained that outsourcing companies are among the top users of H-1B visas."

Why are companies of less than 50 employees allowed to be 100% H-1b?

The Bond Market fears Deflation

This may seem like a strange title for an article in a world where gold is over $1000 an ounce and oil is at $110 a barrel, causing people like my buddy bonddad to write articles entltled, "What Inflation?", and this is somewhat a response to his latest post,
Why Isn't the Bond Market Selling Off From Inflation Fears?.

The very best analysis of the issues in our new economic world was recently set forth, imho, by Prof. Bred DeLong, who described 3 types of crises:

Laissez-faire ideologues hound CEO of GE

From the blog gristmill:
http://gristmill.grist.org/story/2008/3/13/0145/56590

"I came because I was invited," says the man on stage heatedly, squaring off his shoulders to the packed crowd. "I don't need to be lectured by anybody in this room about how to compete!"

From another speaker it might sound defensive, but in this case it is the CEO of GE, the second largest company in the world. Jeff Immelt knows whereof he speaks.

Immelt's outburst came toward the end of a Q&A session that saw him repeatedly assailed by ideological conservatives angry over his involvement in the U.S. Climate Action Partnership, a coalition of large businesses lobbying for a carbon cap-and-trade system, and his leadership role in pushing the business world to embrace clean energy and sustainability.
....

Corporations Owning Corporations

seem to recall that at one time it was illegal for corporations to own other corporations. I think this grew out of the abuses where A owned part of B and B owned part of A.

I think the two Phillips Electronics firms were involved in this type of trick.

If corporations were prohibited from owning other firms and if firms could not set up subsidiaries in other countries, perhaps the incentives to bad behavior would be reduced.

The most obvious present difficulty has to do with tax avoidance. Firms incorporate in tax havens and shift profits to these subsidiaries, many of which are nothing more than mailboxes.

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Retail Sales Fall Sharply in December & February

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Retail sales fall sharply in December and February; price-adjusted sales now down sharply in 4 of the last 5 months as recession deepens

Today’s Census report of nominal retail sales receipts for February also revises down sharply their earlier estimate for nominal sales in December and January. Price-adjusted retail sales have now fallen sharply in four of the past five months and even nominal receipts are back to the lowest levels since last August.

Retail Sales fall behind CPI

This surely eliminates any remaining credibility for those debt industry salesmen and politicians who still deny a recession is underway.

Price adjusted retail sales down Feb. '08

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